GLOBALIZATION AND IT’S IMPACT ON SMALL SCALE INDUSTRIES

GLOBALIZATION AND IT’S IMPACT ON SMALL SCALE INDUSTRIES

ANITH GHOSH(11/MBA/31)

INTRODUCTION  In early 1990s the Indian economy had witnessed dramatic

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policy changes. The idea behind the new economic model known as Liberalization, Privatization and Globalization in India (LPG), was to make the Indian economy one of the fastest growing economies in the world. An array of reforms was initiated with regard to industrial, trade and social sector to make the economy more competitive. The economic changes initiated have had a dramatic effect on the overall growth of the economy. It also heralded the integration of the Indian economy into the global economy. Therefore, the present study analyzes the impact of globalization on Indian Small Scale Industries.

STEPS TAKEN TO GLOBALIZE  1. Devaluation: To solve the balance of payment

problem Indian currency were devaluated by 18 to 19%. 2. Disinvestment: To make the LPG model smooth many of the public sectors were sold to the private sector. 3. Allowing Foreign Direct Investment (FDI): FDI was allowed in a wide range of sectors such as Insurance (26%), defense industries (26%) etc. 4. NRI Scheme: The facilities which were available to foreign investors were also given to NRI's.

GLOBALIZATION  Globalization refers to the process of integration of 

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the world into one huge market. Globalization happens through three channels: trade in goods & services, movement of capital and flow of finance. Globalization in India is generally taken to mean ‘integrating’ the economy of the country with the world economy. The real thrust to the globalization process was provided by the new economic policy introduced by the Government of India in July 1991 at the behest of the IMF and the World Bank. The small scale sector is a vital constituent of overall industrial sector of the country. Therefore our present study analyzes the impact of

The Merits of Globalization are as follows:  There is an International market for companies and

for consumers there is a wider range of products to choose from.  Increase in flow of investments from developed countries to developing countries, which can be used for economic reconstruction.  Greater and faster flow of information between countries and greater cultural interaction has helped to overcome cultural barriers.  Technological development has resulted in reverse brain drain in developing countries.

The Demerits of Globalization are as follows:  The outsourcing of jobs to developing countries

has resulted in loss of jobs in developed countries.  There is a greater threat of spread of communicable diseases.  There is an underlying threat of multinational corporations with immense power ruling the globe.  For smaller developing nations at the receiving end, it could indirectly lead to a subtle form of colonization.

EFFECT OF GLOBALIZATION ON SMALL SCALE INDUSTRIES  Due to globalization the world realized what a big

1billion-population-market India was. They brought their goods to India which were mass produced and therefore cheaper and of better quality than the local goods.They started challenging the SSI and thus posed an end to them.  Further with the introduction of Special Economic Zones (SEZs), the MNCs were facilitated with areas with liberal economic and trade laws, round the clock facilities and concessions to enhance foreign investments and promote exports. This endangered the existence and survival of SSIs.

GOVERNMENT OBJECTIVES BEHIND DEVELOPMENT OF SSI  To provide additional employment opportunities.

 To mobilise resources of capital and skill from

various parts of the country.  To provide a more equitable distribution of national income.  To provide a helping hand to large industries and facilitate them in their work.  Govt. funding, support and intensive promotion has aided people to participate more in this successful phenomenon making SSI the second largest employment sector after agriculture. It forms about 45-50% of our exports.

GOVERNMENT’S SMALL INDUSTRIAL POLICY OF 1991  Emphasis to shift from cheap credit to adequate       

credit. Equity participation by other undertakings (both domestic and foreign) upto 24 percent. Introducing of factoring services by banks. Marketing of mass consumption goods under common brand name. Setting up of sub- contracting exchanges. Establishment of technology development cell. Opening of quality counselling and technology information centres. New technology up gradation programmes.

CONCLUSION  It can be said that both globalization and SSIs are the

essentials of Indian economy and India must make efforts to promote, sustain and aid both in a fair and unbiased way.  A fruitful measure would be to reserve certain goods for production exclusively by the SSIs and their intelligent outsourcing by the govt. to ensure maximum benefits.  Also the govt. should advertise the indigenous goods worldwide so that the foreign folk also go in for the ethnic items produced here like khadi, silk, wool, statues, gems, ornaments, etc. as these represent the traditional art form and culture of the region.  While globalization has put us on the map of superpower countries, SSIs have empowered the common man to walk with the same stride as the big-wigs.